Tax Type
Individual Income Tax
Description
Service Members Civil Relief Act
Topic
Federal Conformity
Persons Subject to Tax
Records/Returns/Payments
Servicemembers Civil Relief Act
Date Issued
06-10-2013
June 10, 2013
Re: § 58.1-1821 Application: Individual Income Tax
Dear *****:
This will reply to your letter in which you seek correction of the Virginia individual income tax assessment issued to ***** (the "Taxpayer") for the taxable year ended December 31, 2009. I apologize for the delay in responding to your appeal.
FACTS
The Taxpayer filed a Virginia individual income tax return as a resident for the 2009 taxable year. Based on information provided by the IRS, the Department adjusted the Taxpayer's return to match the federal adjusted gross income (FAGI) reported on her federal return and issued an assessment. The Taxpayer appeals the assessment, contending her military pay is not subject to Virginia income tax because the military considers her to be a resident of ***** (State A).
DETERMINATION
Virginia Code § 58.1-301 provides that terminology and references used in Title 58.1 of the Code of Virginia will have the same meaning as provided in the Internal Revenue Code (IRC) unless a different meaning is clearly required. For individual income tax purposes, Virginia conforms to federal law, in that it starts the computation of Virginia taxable income with federal adjusted gross income (FAGI). Income included in the FAGI of a Virginia resident is subject to taxation by Virginia, unless it is specifically exempt as a Virginia modification pursuant to Va. Code § 58.1-322.
The Service Members Civil Relief Act (the "Act"), codified at U.S.C. § 571 et seq., provides that military personnel do not abandon their legal domicile solely by complying with military orders that require them to take residence in a different state or country. The Act, however, does not preclude the possibility that armed forces personnel may acquire a new legal domicile in the state where they are stationed, and thus subject themselves to taxation by that state as if they were a domiciliary resident. In order for the change of domicile to occur, there must be an abandonment of the old domicile and the acquisition of a new one. This change must be exhibited by an individual's intent and conduct. See United States of America v. Minnesota Department of Revenue, 97 F. Supp. 2d 973 (2000).
In general, the Department will not seek to tax an active duty military service member so long as the member maintains sufficient connections with another state to indicate intent to maintain domicile there. Such connections would include filing a State of Legal Residence Certificate (Department of Defense Form 2058), obtaining a driver's license, registering to vote and voting in local elections, registering an automobile, and exercising other benefits or obligations of a particular state. As long as a military service member maintains such connections, they would be considered to be a resident of the other state even though they work, live, and establish a permanent place of abode in Virginia. See Public Document (P.D.) 10-237 (9/30/2010).
The Taxpayer filed a 2009 Virginia income tax return as a resident and reported all of her wages earned in her civilian job as Virginia source income. The only information provided indicating that she may not be subject to Virginia tax on all of her income is her statement that has declared State A to be her home state for military pay purposes.
It is well established that a state may tax all the income of its residents, even income earned outside the taxing jurisdiction. In People of State of New York ex rel. Cohn v. Graves, 300 U.S. 308, 57 S.Ct. 466 (1937), the United States Supreme Court explained, ". . . the receipt of income by a resident of the territory of a taxing sovereignty is a taxable event is universally recognized." See also Mary T. Ryan v. Commonwealth of Virginia, 169 Va. 414, 193 S.E. 534 (1937). Absent any objective evidence to the contrary, Virginia is well within its authority to impose its income tax on all of the income of the Taxpayer.
By letter dated January 28, 2013, the Department requested additional information to ascertain the Taxpayer's domiciliary status for the taxable year at issue. As of the date of this letter, the Taxpayer has provided no objective evidence to substantiate her claim that the assessment for the 2009 taxable year is incorrect. Because the Taxpayer has failed to furnish the required information, there is no basis to adjust the assessment at this time.
Virginia Code § 58.1-205 provides that in any proceeding relating to the interpretation of the tax laws of Virginia, an "assessment of a tax by the Department shall be deemed prima facie correct." As such, the burden of proof is on the Taxpayer to show that the Department's assessment is erroneous. Further, Va. Code § 58.1-1826 precludes a court from granting relief to taxpayers seeking correction of erroneous state tax assessments in cases in which the erroneous assessment is attributable to the taxpayer's willful failure or refusal to provide the Department with necessary information as required by law.
Notwithstanding the above, I will grant the Taxpayer one final opportunity to provide sufficient evidence regarding both her domicile and her husband's domicile and military status for the 2009 taxable year. Such evidence should be provided within 30 days from the date of this letter to: Virginia Department of Taxation, Appeals and Rulings, Attention: *****, Post Office Box 27203, Richmond, Virginia 23261-7203. If the requested information is not provided within the allotted time, the outstanding balance of the assessment will become immediately due and payable.
The Code of Virginia sections and public document cited are available on-line at www.tax.virginia.gov in the Laws, Rules and Decisions section of the Department's web site. If you have any questions regarding this ruling, you may contact ***** in the Office of Tax Policy, Appeals and Rulings, at *****.
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- Sincerely,
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Craig M. Burns
Tax Commissioner
AR/1-5151409723.B
Rulings of the Tax Commissioner